ESCO 2.0
In June 2005, the GAO released a report, “Energy Savings: Performance Contracts Offer Benefits, But Vigilance Is Needed To Protect Government Interests.” The Office of the Under Secretary of Defense for Technology, Acquisition, and Logistics agreed with the GAO findings. “While these complicated contracts are structured to ensure that savings will exceed costs,” the DOD noted, “we recognize that our measurement and verification procedures must be improved to confirm estimates with actual data.” Unverified savings, often stipulated rather than proven, do not put more oil in the ground, take CO2 out of the air or reduce operating budgets
The GAO ESPC study brings into question whether or not there is sufficient data to prove that the gains delivered by ESCOs are sustainable over time. The study further questions the practice of having ESCOs monitoring and validating the performance of their own projects.
In fact, most buildings and facilities exhibit the same basic limitations with respect to energy conservation and optimum maintenance. US Federal studies show that major and minor building systems routinely fail to meet performance expectations, and these faults often go unnoticed over time. The functions of a building, the number of tenants, and the configuration of the space change over time in unanticipated manners that adversely affect the systems that control building performance.
Surprisingly, almost all buildings, building complexes, and systems inside buildings still operate in a disconnected, stand-alone manner. Proprietary systems result in buildings that needlesly waste energy. Recent studies have found that roughly 30% of LEED certified buildings perform substantially better than anticipated, while 25% perform substantially worse than anticipated. In general, LEED certified buildings perform 25-30% better than non-LEED certified buildings with regards to energy use. It is ultimately difficult or impossible for customers to construct a single integrated picture that correlates energy usage and maintenance costs to control system performance, space usage, conservation measures, and the behavior of those using the facility space.
A more recent phenomenon is the concept of combining the benefits of performance contracting with the benefits of green buildings, affectionately described as green performance contracting. The reason the concept makes sense is because for green buildings, the costliest pre-requisites to meet are usually the energy efficiency requirements. The LEED rating system requires buildings to be benchmarked using the EPA EnergyStar system. The minimum score to meet the LEED prerequisites is a score of 75 or greater (meaning the building is in the top 75 percentile of benchmarked buildings). Since performance contracting attempts to find all the sources of energy waste, then a building that has gone through the performance contracting process should meet the LEED prerequisite.
Green performance contracting can be used to achieve sustainability goals in new building design and construction as well as in existing buildings. New Buildings: Higher-efficiency choices are compared to the modeled performance of the as-designed less-efficient building. Applying performance contracting to buildings being designed and built is the perfect cure for pressure to “value engineer” the efficiency and sustainability out of new buildings as they are designed. In new buildings, performance contracting bridges the gap between the first-cost and life-cycle-cost perspectives by using long-term energy savings to pay for the incremental first-cost of high-efficiency measures.
Existing buildings: Green performance contracting provides a mechanism for implementing and financing the building’s efficiency and sustainability upgrades, including improved operations. Achieving sustainable building performance in existing buildings can be done at reasonable costs. If needed, system or building upgrades can be spread out over time and implemented when capital dollars become available.
Green performance contracting provides comprehensive integrated solutions to a wide variety of building, site and infrastructure improvements, and it allows building owners to pay for these building sustainability improvements, including capital improvements or renewable energy, with funds in the organization’s expense budget.
The result is a better performing building along with all the public relations and marketing benefits of green buildings.
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